Mobile Virtual Network Enablers (MVNEs) as distributors
While Mobile Virtual Network Operators (MVNOs) were heavily discussed some years ago when we lived through the first mobile Internet phantasies, they become increasingly important again. Why? There are 2 reasons: 1. Operators will compete heavily through innovative Marketing in the future and MVNOs are successful thanks to innovative Marketing. 2. New software companies such as Mobile Virtual Network Enablers (MVNEs) just make it very inexpensive to launch a new MVNO. When successful MVNO Virgin Mobile started in UK some years ago, companies like Spinbox were not yet around. Now they are. So here's a background story by Anders Ingeström, CEO of Spinbox.
Anders Ingeström:
The roles of MVNOs and MVNEs has been discussed extensively within the European telecoms community. Do they constitute a threat to networks owners or do they positively contribute to restructure the industry?
It is probably more productive to take a macro perspective of the mobile operator industry, to see where these new market participants fit in.
The mobile operator industry has evolved over the last decade. Its growth has been explosive, only rivaled by the rapid acceptance of Internet access in both the business and consumer markets. In most European countries today, more than 75% of the population have mobile phones.
Mobile telephony has changed from being a status symbol into a commodity. Consequently, the market is entering a more mature phase. The challenge has moved from being concerned about growth to focus on winning and maintaining market share at lower cost of sale.
In the majority of mature industries the value chain is split into links served by specialists. The roles of producer, distributor and retailer become separate and even split further into sub-segments.
We see this as natural in many unregulated industries, while it is a fairly new phenomenon in the telecoms area.
So far mobile operators have predominantly had a full vertical market integration strategy. Many operators control/own the spectrum, base stations, connecting networks, systems infrastructure, customer service, SIM logistics, pricing, packaging, billing, invoicing, branding and points of sale.
The fixed line telephony and Internet access market has already taken important steps in the direction of specialization. In Sweden today, consumers buy fixed line subscriptions from such diverse vendors as power companies, network sales organizations and discount operators, all running on the incumbent network owner’s infrastructure. A substantial share of the end user market is handled by vendors other than the network owner. We see no reason why this development will not continue in the mobile sector.
Mobile virtual network enablers (MVNEs) function as value added distributors to brands aspiring to serve consumer or business subscribers more efficiently than network owners. These brands (mobile virtual network operators/MVNOs) have a mix of unique assets that are valuable in the subscriber relationship; allowing lower subscriber acquisition costs, reducing churn, decreasing price focus, inexpensive billing channels, enabling more relevant add-on services etc.
The MVNE role is to lower the barrier of market entry for MVNOs and to continously offer cost effective back end services through economies of scale. These services are mainly managing the network owner relationship, billing system operation, second line subscriber support, systems administration, service component procurer and aggregator. The MVNO brand can even chose to outsource invoicing and first line customer care to and MVNE. The benefit of MVNEs is that they reduce the risk level for MVNOs, lower break even volumes and offer a short time to market. Further more the MVNE shares the same interest in the MVNO business case. There is always a potential conflict of interest between the network operators own product, operations and brand in relation to the MVNO. The MVNE resolves this potential conflict of interest by its role as middleman and independent distributor in the ongoing restructuring of the industry.
From the operator’s point of view the MVNE is an efficient indirect sales channel. MVNEs are built to serve multiple brands, while network owners are not. MVNEs have organizations and systems set up to offer multiple MVNOs a standard set of services and also the ability to make certain customized solutions based on the MVNOs need.
MVNEs also filter the market for network owners from MVNO initiatives with low sustainability. Another benefit is that MVNEs have specialist mobile network knowhow, and function as the one competent point of contact between the network owner and the more marketing/sales oriented brands. This will become increasingly important when the current second wave of MVNOs enter the market – organizations with strong brands, distribution capabilities and strategic interest on the end user business but low level of know how on the technical and operational aspects of the mobile system area.
MVNEs have the role of catalyst between mobile network owners and brands serving the end user market. Several MVNOs today would not be in business if MVNE services were not available.
The level of interest from both network owners and MVNO’s in the MVNE proposition in combination with the growth of our business makes us confident that MVNO’s, MVNE’s and network operators have bright joint future!
